Haley signs tort reform law, creating punitive damages cap

Gov. Nikki Haley signed changes to South Carolina civil litigation laws on Tuesday, including a $2 million cap on punitive damages that she said was long overdue.

According to the S.C. Chamber of Commerce, which had sought the changes, the new law includes a cap on punitive damages modeled after the state of Florida. The legislation caps punitive damages greater than $500,000 or three times the compensatory damages awarded.

However, if the court finds a defendant is motivated primarily by financial gain or a defendant’s actions rise to the level of felony charges, then the award can be in­creased to the greater of $2 million or four times compensatory damages.

If it is proven the defendant intended to harm the claim­ant, was convicted of a felony arising out of the same act or acted under the influence of drugs or alcohol, there is no cap for punitive damages.

S.C. Chamber of Commerce President Otis Rawl said passage of the tort reform law was his organization’s No. 1 priority this year. The changes in the law were not everything the chamber wanted, Rawl said, but he added that the legislation was a good compromise.

“We were the only state in the Southeast without a punitive damages cap,” said Rawl, adding that until now, that status had been a competitive disadvantage in recruiting new businesses to the state.

Haley agreed that the lack of such a provision hurt recruiting of industries.

“It automatically became a topic of conversation,” Haley said. “This was very simple. This was a vote either for business or for trial lawyers.”

Haley said tort reform remains a work in progress. She wants provisions added to the law that would require losers in civil litigation to pay the costs of the trial.

She said she thinks the changes create a “fair balance in our state,” while still permitting citizens their day in court.

Harry Lightsey, a Columbia attorney who worked for passage of the civil litigation changes, said the tort reform bill was the culmination of efforts that began in 2003.

“In 2003, Hampton County was recognized as a litigation hell hole,” Lightsey said, referring to a South Carolina county that had become notorious for its generous civil lawsuit awards to plaintiffs.

“Businesses large and small came together to change that,” Lightsey said, adding, “the governor was the difference-maker this year.”

Haley also said the new law represented a just compromise between two extremes.

“The House had a $350,000 cap on punitive damages. I’d like to have seen that happen,” Haley said. “But the original Senate version had no cap at all.”

Louis Gossett, president of the S.C. Manufacturers Alliance, said tort reform remains a work in progress.

“We’re always going to be working on this,” Gossett said. “We’d like loser-pay. What tort reform is about is certainty; it’s about stability. There is a place for litigation in our society. But there must be consequences for frivolous acts.”

As far as who decides what is frivolous, Gossett said, “That’s a good question. Probably the General Assembly and the courts.”